Organization Design Capability Maturity Drives Transformation Success
Over the past 24 months, Forrester has received a significant number of inquiries from clients requesting assistance in their organization design initiatives. There has been a range of more basic questions along with some more nuanced queries: “What are others doing?” “What is the best organization design process?” “What digital capabilities should I be investing in?” “Should I be centralized, distributed, or federated?” Some clients even go so far as to ask, “How are other firms transforming to become a product-aligned firm?” or “What’s the best way to implement the Spotify model?” Forrester’s research on adaptive operating models has challenged the way our clients diagnose their current operating models and articulate their desired future state. If you are considering an operating model transformation, the first step is to consider the following reports:
- “The Anatomy Of An Operating Model.” This report presents Forrester’s operating model reference architecture and provides an example of how to use it to redesign an enterprise architecture practice. The framework can be used at a team, function, division, or enterprise level. The framework ensures that organization designers ask pertinent questions when undergoing a redesign of their operating model.
- “The Future Of Work In Insurance.” This report presents the impact of digital technology and automation on the work performed in your organization. Understanding the future of work is essential for designing an adaptive organization. Though the report highlights the insurance industry, the concepts are agnostic to industry.
- “Employee Experience Is Crucial To Success In The Era Of AI, Automation, And Robotics.” This report focuses on the employee. Forrester’s employee experience research has proven that firms that focus on employee experience and employee engagement deliver better value and experiences to their customers.
Last week, I continued my research into organization design best practices. I attended the Organization Design Conference in New York hosted by the Conference Board. I was able to hear how firms — including Johnson & Johnson, FedEx, The New York Times, Cigna, Google, Shaw, Medtronic, Sage, CliqStudios, Fluor, and others — executed their organization transformation. The key points I took away were as follows:
- Frameworks and process are key to success. Without exception, every one of these firms chose and used a proven organization design framework, with its associated processes. The most common frameworks were Galbraith’s Star Model, AlignOrg’s Cube model, and OrgVue’s HR and finance model. Each of these frameworks were enhanced by the designers to fit their needs. The downside of these models is that they are paint-by-numbers frameworks: Do A, then B, then C, and so on. Forrester’s framework and processes described in the above reports are iterative and ask significantly more questions than these models. This should not be surprising, as the Forrester framework is coauthored with our clients and has evolved over the last five years by practitioners.
- Revenue growth is the primary goal of the transformation. Each firm explained why they needed to transform. It was very clear that nobody aspired to be a digital company: to be customer-led and product-aligned. These were just the means to an end of growing revenue: Cigna was executing an M&A to grow the business; the transformation was about merging two firms; The New York Times was setting up a separate digital media arm to grow revenues; Shaw was transforming from a manufacturing model to a sourced business model to double revenues; and FedEx chose to transform its Freight business to increase volumes and, thus, revenues. These were strategic transformations and not tactical changes.
- Design principles are the foundation of operating model transformations. Every firm was able to articulate the principles that would guide all their design decisions. A common principle was agility. One missing principle was being adaptive. When challenged, the presenters focused on faster delivery and time to market, but none had looked at being adaptive. The Forrester framework is built on adaptiveness as well as agility.
- Tasks and people are key concerns of designers. Understanding the work and the underlying tasks of today and in the future was a key concern of designers. In addition, designers looked at the impact on their people in terms of the number of people, their skill set, their culture, and their own desires. The key takeaway here was to design around work, then people, not the other way around. Also, each presenter acknowledged that work drove culture change, not that culture drove work change.
The one area that I felt was not covered very well, if at all, was the area of unbundled capabilities. Many Forrester clients are consuming business capabilities from third parties, rather than owning and managing the capabilities themselves. For example, IT could look at how it consumes capabilities from cloud service providers, rather than building a full set of cloud capabilities. Also, the business could consume capabilities from payment service providers, and so on. Creating an ecosystem of capabilities will impact the way that the firm operates and, thus, how the operating model should be designed.
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